banking and economics
loan sharks are illegal - unsurprisingly
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This morning, I was running late (for a time management course), so I took the bus in to work. Naturally, I wasn’t awake enough when I got on the bus to pay attention to much, but as I was getting off I noticed an advert from the council about loan sharks. The ad basically said that loan sharks are illegal, and gave some advice numbers and a place to call or text to shop one in.
In case you’re not familiar with the concept, a loan shark is someone who will lend you money, unregulated and therefore illegally, and which you then pay back in weekly instalments. The interest rate is literally extortionate, and the results of non-payment is traditionally threats of, and actual, violence.
You know, I’ve never really considered that loan sharks actually exist in this day and age. I’ve seen them in tv dramas and so on, but (presumably) because I’ve lived a reasonably sheltered lower middle class existence all my life, I haven’t interacted with this end of personal finance. I wonder what else I’m missing out on, and I hope I don’t need to find out.
Image by alq666
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11 comments for “loan sharks are illegal - unsurprisingly”
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Interesting that the local council had to place ads around to warn people about loan sharks. It must be quite a serious problem, serious enough for the ads to be put up.
However, sometimes people just don’t have any other avenues. (eg lack of knowledge or skill to get a loan) so a loan shark is their only choice from their perspective.
These guys are just sharks.
Rates like 10% per month. Our tabloids carry gory tales about people’s houses being sprayed with red paint, debt collectors threatening seriously dire consequences etc. etc.
The really sad thing is that so many of these guys lend to completely hopeless borrowers like gamblers and the like.
And to top it all, they go after elderly parents if their sons or daughters borrow and then bolt off.
PS: Hope you made it in time for your TM course…hehe
What exactly defines the difference between a loan shark, and a person to person loan at high interest due to high risk?
Say I have a friend that needs 2 grand ‘no questions asked’ . . . I want to charge him 60% APR cause he’s no good with money and it’s more of a gamble than an investment. Am I now a loan shark?
I wonder if it’s the same in the States…or perhaps state by state (because in that way we’re more like the EU, lots of things differ on the local level).
@Traciatim:
In the UK if you are lending money, and you aren’t licensed by the Office of Fair Trading then you are have no legal recourse to the money. In that case, it’s the point at which you start threatening the borrower that you become a loan shark as it’s that aspect which the most illegal. I suspect that it’s similar in most places.
I love that image! I had a similar thought recently when I learned about a woman who took out a loan for a used car - I don’t know what the agreed-upon price was, but the financing terms were almost $700 per month for 60 months at 13.9% interest! The dealership apparently didn’t blink at the terms, even though the woman didn’t have much income. I couldn’t help but think that I am so out of touch with how some (make that many) people live.
@Traciatim: Loan sharks are not licensed to loan money. Not being licensed alone doesn’t make you a loan shark. It’s when you start threatening people with violence that you become one I believe. Because you can still do a personal loan to a friend or relative, have it notarized and include an interest rate and payment plan.
Loan Sharking can be a federal offense in the US, if they want to prove it funds other criminal activity.
Loan Dolphining on the other hand…
Loan dolphining…good!
In the U.S. unlicensed loan sharks can go to jail. Licensed loan sharks get rich on payday loan stands, and loan sharks with enough money to hire lobbyists get really rich issuing credit cards.
Usury laws are effectively extinct in this country, and so credit-card interest makes a pikerly little street loan shark’s charges look like chump change. And the legalized usurers, while they can’t threaten to beat you up, certainly can subject you to extortion: it’s called “ruining your credit” and “siccing a collection agency on you.”
Do those Cash Advance and Check Cashing places qualify as loan sharks? I think so.